Computing Alternating Offers and Water Prices in Bilateral River Basin Management
Tinbergen Institute Discussion Paper No. TI 06-095/1
31 Pages Posted: 7 Nov 2006
There are 2 versions of this paper
Computing Alternating Offers and Water Prices in Bilateral River Basin Management
Computing Alternating Offers and Water Prices in Bilateral River Basin Management
Date Written: October 2006
Abstract
This contribution deals with the fundamental critique in Dinar et al. (1992, Theory and Decision 32) on the use of Game theory in water management: People are reluctant to monetary transfers unrelated to water prices and game theoretic solutions impose a computational burden. For the bilateral alternating-offers model, a single optimization program significantly reduces the computational burden. Furthermore, water prices and property rights result from exploiting the Second Welfare Theorem. Both issues are discussed and applied to a bilateral version of the theoretical river basin model in Ambec and Sprumont (2002). Directions for future research are provided.
Keywords: International River Management, Negotiation Theory, Game Theory, Computations, Non-transferable utility, Property rights, Walrasian equilibrium prices, Applied General Equilibrium model
JEL Classification: C72, C78, D50, D58
Suggested Citation: Suggested Citation